Insurance cover for environmental losses is often incomplete or even non-existent without a dedicated environmental policy in place, according to a new research paper from the International Underwriting Association (“IUA”) examining potential environmental claims scenarios.
The report highlights the gaps in cover that exist when relying on standard public liability and property policies, or even public liability policies with regulatory clean up and contamination costs extensions.
It highlights a range of potential loss scenarios that could affect different business sectors and result in incidents that are both costly and time consuming to handle.
“What is most striking about the scenarios is that it is easy to imagine a very wide range of businesses being involved in an environmental incident,” commented Chris Jones, IUA director of market services. “Environmental liability is clearly not only the preserve of heavy industry.”
The research paper, Environmental Loss Scenarios, was prepared by the IUA's Non-Marine Environmental Committee, which is made up of underwriters from across the association's 40 member companies.
Among the scenarios it covers are dust problems on a construction site, failure of a hotel's oil tank, a spill of pesticide during transportation, and pollution of a car park from poorly maintained drains. All the scenarios are based on real life examples.
The IUA said that the key message of the report is that the gap between the range of environmental liabilities to which organizations now are exposed and the liability cover provided by traditional insurance policies has become uncomfortably wide and will get wider.
“It is important to remember that environmental liabilities are often difficult to manage,” added Mr. Jones. They can take a long time to resolve and involve much technical input which, without an insurer's help, may prove a considerable burden.
“The importance of having adequate environmental insurance in place has significantly heightened with the introduction of the E.U. Environmental Liability Directive which is based on the 'polluter pays' principle. This places strong emphasis on risk assessment, management and prevention by operators.
“Many E.U. member states have also required operators to put in place financial security to meet potential liabilities under the directive. So far the U.K. has not imposed such a measure but may yet choose to do so.”
Learn more: www.iua.co.uk/environmental.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].